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Goldman Sachs Executive Director Calls the Bank "Toxic" on the Way Out

There are those who go quietly, and there are those who resign and then write an op-ed piece for the New York Times. Goldman Sachs' executive director Greg Smith is one of the latter.
On Wednesday morning, Goldman Sachs is stunned and is keeping quiet while it desperately searches for the appropriate response to Smith's column in which he accuses the bank of a decline in “moral fiber” and “ripping off” its clients.

Remember, this is not a former employee who has just been fired, then written the piece in a fit of bitter rage. This is an intelligent, experienced man, undoubtedly on a big salary, who has simply had enough. That is why the Wall Street Journal's Iain Martin is calling it “absolutely devastating” for GS, and the BBC's business editor Robert Preston called it “astonishing”. Smith obviously thought long and hard before making this move.

Smith had been the head of Goldman Sachs' U.S. equity derivatives to Europe, the Middle East and Africa, and he had worked for the bank for twelve years in both the New York and London offices. In his piece, he wrote that the Goldman Sachs he joined, “revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients”.

However, he claims that is no longer the case, and that the blame for that shift in company culture can be placed firmly on current CEO Lloyd Blankfein and President Gary Cohn, stating that, “I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs.”

Smith said that he felt ill listening to colleagues callously talk about ripping off clients. “Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets', sometimes over internal email. I can honestly say that the environment now is as toxic and destructive as I have ever seen it… I truly believe that this decline in the firm's moral fiber represents the single most serious threat to its long-run survival.”

He also says that, “if you make enough money for the firm (and are not currently an axe murderer) you will be promoted into a position of influence”.

It is an absolutely stunning attack coming, as it has, from someone who was so personally invested in the company for so long. Obviously this is not the first time that the bank has been publically criticized. GS is still reeling from the infamous “vampire squid” article in Rolling Stone.

But this is different, because this is coming from someone who Goldman Sachs, as well as business analysts, experts and insiders, considered one of their own. If Smith had been fired, the bank would find the whole thing easier to deal with. “Of course he's angry,” they would say. “We just fired him.” They would then ignore him until he went away. But this is a guy who seems to genuinely believe what he has written, and he has seen it firsthand.”

Just as this story went to press, Goldman Sachs released a statement saying, "In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”